5 Personal Finance Rules for the Recession

Learn smart tips for surviving the recession

There's no denying that a recession can be frightening. Everyone knows someone who has lost a job, had work hours cut, or had a house foreclosed upon. However, there's no need to panic. Now's the time to dust off some important rules about personal finance.

1. Create a budget and stick to it Take the time to add up and track your regular expenses. Overestimate for those inconsistent monthly bills, such as those for groceries or gasoline. Compare how much money you're spending each month with your income. Adjust your spending habits to ensure you can afford to pay each bill while still having money left over for emergencies.

2. Cut costs Many Americans have become accustomed to living above their means. It's time to cut costs. It may be your gym membership, movie rentals or even special treats at the grocery store. You may not think that these costs make a big difference, but once they're added up, the costs can be quite staggering. If there are things you simply can't live without, look for ways to save money. You could switch to generic brands, exercise at a local recreational center, or even sign up for a low cost DVD rental membership.

3. Save for the future Should you lose your job, you'll want to have money saved to help pay your bills. Compare savings accounts and look for one that has the highest interest rate and doesn't charge you fees. Put any money you have left each week into the account; only use that money for emergencies.

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4. Don't apply for new lines of credit During a recession, you may have a hard time paying the bills you already have. To add even more debt to the pile is an irresponsible personal finance choice. What happens if you lose your job? Not only will you have your previous debt to pay, but also you'll have even more. Do you really want the stress of all that debt? No one does. Play it safe and avoid filling out those credit card applications. Your wallet will thank you.

5. Never pay for bills with credit cards One of the biggest no-nos of personal finance is to "rob Peter to pay Paul." There may come a time when money is tight. There may even be bills that you have trouble paying. It's much better to borrow the money from family or friends than to use your credit cards. If borrowing money is not an option, call companies and ask for an extension. If you have a good payment record, most companies will work with you, even lowering your payments.

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